19.1 Bare Act Provisions
16. Fund of the Commission.—(1) The Commission shall have its own Fund; and all sums which may, from time to time, be paid to it by the Central Government and all the receipts of the Commission (including any sum which any State Government or any other authority or person may hand over to the Commission) shall be carried to the Fund and all payments by the Commission shall be made therefrom.
(2) All moneys belonging to the Fund shall be deposited in such banks or invested in such manner as may, subject to the approval of the Central Government, be decided by the Commission.
(3) The Commission may spend such sums as it thinks fit for performing its functions under this Act, and such sums shall be treated as expenditure payable out of the Fund of the Commission.
19.2 Explanation:
Section 16 explains where the money in this Fund actually comes from. It includes grants given by the Central Government and all sums of money received by the Commission from other sources. All these receipts are credited to the Fund defined in Section 2(c). Under section 16, the fund of the Commission is separate from the Consolidated Fund of India which contains the Government funds proper under Article 266 of the Constitution. The expenditure incurred by the University Grants Commission in payment of grants to different institutions is an expenditure, out of the Fund of the Commission and not out of the Consolidated Fund of India.
General Development Grants are being provided to the Central, State and Deemed Universities for their overall development covering aspects like enhancing access, ensuring equity, imparting relevant education, improving quality, making the administration effective, enhancing facilities for students, augmenting research facilities and any other plans of universities. Maintenance Grants are also being provided to limited number of universities to meet their recurring expenditure on salaries of both teaching and non-teaching employees, maintenance of labs, libraries, buildings and also for obligatory payments such as taxes, telephone & electricity bills, postage, etc. The Central and a few Deemed Universities are being paid both Plan and Non-plan grants whereas the State Universities are being paid only Plan grant.
As Sub-section (1) UGC has its own separate Fund. All money received by the UGC goes into this Fund. This includes regular grants from the Central Government as per Section 15 and any money from State Governments, other authorities, or ministries. All payments made by the UGC, such as grants to universities for maintenance, development, research, etc., come only from this Fund. No money leaves without going through it first. As per Sub-section (2) all the money in this Fund must be safely handled. The UGC decides where to deposit it or how to invest it. But the UGC cannot do this freely, it needs prior approval from the Central Government to ensure proper financial control and safety.
As per Sub-section (3) UGC has flexibility in spending. It can use as much money as it thinks necessary from the Fund to perform its duties under the Act. All such spending is treated as official expenditure from the UGC’s own Fund and not directly from the government’s main treasury i.e. Consolidated Fund of India. This gives the UGC operational independence while keeping it accountable.
19.3 Critical Analysis
Procedural Delay: The management of the Fund is characterized by a dual-control mechanism that often slows down the movement of capital. As per sub-section (1) all payments must be made therefrom, every grant to a university must pass through the internal accounting filters of the Fund. The multi-layered verification process within such statutory funds often adds weeks to the release of research stipends and institutional grants. Under sub-section (2), any decision regarding the investment of moneys must be subject to the approval of the Central Government. In practice, this means the UGC cannot autonomously react to market fluctuations or shift funds to higher-interest accounts without a lengthy approval process from the Ministry of Finance.[1] Since sub-section (3) treats all performance-related sums as expenditure payable out of the Fund, the UGC must maintain rigorous ledger entries for every penny. The time taken to reconcile these accounts often delays the issuance of Utilization Certificates, which in turn delays the next cycle of funding.
Constitutional Validity and Ultra Vires: Section 16 is the statutory mechanism that ensures the UGC remains a body corporate with its own financial identity. Sub-section (1) allows the Fund to receive money from any other authority or person. If the UGC accepts a large gift from a private university group and then issues favorable regulations for them, it could be challenged as a violation of the constitutional principle of administrative fairness.[2] The validity of the Fund is protected under Article 285 and Article 266 principles, ensuring public money is used for statutory purposes. However, a conflict arises if the Central Government uses its approval power in sub-section (2) to force the UGC to invest in specific government bonds that may not yield the best returns for the educational sector. Under sub-section (3), the Commission may spend sums as it thinks fit for performing its functions. If the UGC spends money on activities not explicitly mentioned in Section 12 e.g., heavy political branding or unrelated social schemes, such expenditure can be challenged as ultra vires. The statutory bodies must act within the four corners of their parent Act regarding the use of public funds.[3]
Room for Misinterpretation: The broad language of performing its functions creates a gray area in financial accounting. Sub-section (1) allows State Governments to pay into the Fund. However, there is no clarity on whether such funds can be earmarked. If a State pays money specifically for its own universities, can the UGC carry it to the general Fund and spend it elsewhere? This lack of clarity often leads to friction between State and Central accounts.[4] There is significant room for misinterpretation regarding whether the UGC can invest in modern financial instruments or if it must stick to traditional nationalized bank deposits. This ambiguity often results in the Fund being under-utilized or earning sub-par interest. The Commission often interprets Sub-section (3) to mean it can divert funds intended for Research into Administrative Overheads, if it deems them fit for performing its functions. Without a fixed percentage cap in the Act, this interpretation is rarely checked until a formal audit.
Colonial Era Policy and Irrelevance: Section 16 reflects the Consolidated Fund philosophy of the British Raj, which centralizes all receipts into a single, government-controlled pot. This model was designed by the British to ensure that no department or commission could develop financial independence from the central treasury. By making the Fund’s investment subject to approval, the Act ensures the UGC remains a dependent limb of the state rather than an autonomous academic trust. The Higher Education Financing Agency (HEFA), established in 2017, has made the traditional UGC Fund model somewhat irrelevant for major capital expenditure. HEFA uses a market-linked borrowing model, whereas Section 16 relies on the old-fashioned receipts and payments system.[5] Modern global universities rely on Endowment Funds that are shielded from government interference. Section 16 is archaic because it treats the UGC as a pass-through entity for government cash rather than a wealth-generating trust that can sustain higher education through economic downturns.
[1] “Funding by University Grants Commission”, Shiva Mishra, Centre for Civil Society,
[2] Kranth Sangram Parishath vs Sri N. Janardhan Reddy [1992(3)ALT99]
[3] Centrlal Board Of Sec.Education & Anr vs Aditya Bandopadhyay & Ors [2011 AIR SCW 4888]
[4] “Guidelines For General Development Assistance To Central, Deemed And State Universities During XI Plan”, University Grants Commission
[5] “General Financial Rules, 2017”, Ministry of Finance Department of Expenditure
